The Case for Boosting Canada’s Military Spending

On June 9, Prime Minister Mark Carney dramatically increased Canada’s military spending to two per cent of gross domestic product by 2026. The increase marked an investment of over $9 billion for the Canadian Armed Forces between 2025 and 2026.

This spending is five years ahead of schedule under the commitments the Liberals made under Justin Trudeau, and Carney promised vaguely to increase spending still more in future.

But the jolt of spending so much, so soon, was a shock.

It shouldn’t have been. We have been subjected to hybrid warfare waged by various states and organizations for many years. Our NATO allies (apart from the United States) are boosting their own military spending far beyond a mere two per cent.

Last year, Polish Prime Minister Donald Tusk said Europe has been in a “pre-war period” since Russia invaded Ukraine in February 2022. That’s why Poland is currently spending 4.7 per cent of its GDP on defence.

Reluctance to rearm is understandable. We can think of many more constructive things we could do with the money we’re pouring into insanely expensive military equipment. It makes even less sense as climate disasters worsen. Whether a big military fights a war or deters it, it only adds to carbon emissions that will further destabilize countries coping with drought, food insecurity and lethally high temperatures.

But as long as countries like Russia, China and the United States pretend climate change is just a side issue, we will have to boost our military to strengthen our allies and to deter anyone wanting to weaken us.

Two per cent? Easy

If history is any guide, Canada can do two per cent of our GDP with ease, and get up to five per cent within a few years. After all, we’ve done it before.

In 1938, Canada was a country of a little over 11 million people. The Great Depression had been going on for almost a decade. Unemployment was still around 10 per cent. Immigration had been low for years; after all, what was the point of migrating to a country with no jobs?

Our military spending in 1938 was about 1.5 per cent of our GDP — about what it is today, though of course GDP then was far smaller than it is today.

Then, in September 1939, Canada entered the Second World War and put its entire economy on a wartime footing.

According to a 2022 report by Drew Fagan of the Munk School of Global Affairs and Public Policy, “the military took just over one dollar in six in 1939/40; in 1944/45, war expenditure was well over five dollars in six.”

Ottawa, meanwhile, had to enlarge to keep up. “Government also grew massively in terms of its share of the economy,” Fagan writes. “Ottawa’s expenditures peaked at more than 45 per cent of GDP.” That was in 1943 and 1944; military spending alone in those years was 37 per cent. (Federal spending is now estimated at 15.9 per cent of GDP, up from 13 per cent before the pandemic.)

During the Second World War, Canadian wartime production and procurement were largely under the control of legislator Clarence Decatur Howe, a U.S.-born engineer. He’d made a fortune building grain elevators across the prairies in the 1920s. In the 1930s he went into politics with Mackenzie King’s Liberals; in 1940 then-prime minister King appointed him minister of munitions and supply, but C.D. Howe was better known as the “minister of everything.”

Howe was, in effect, a capitalist running a socialist economy — not for the benefit of Canadian workers, but to win a war.

Running a command economy

Under the War Measures Act Howe became, in effect, the commander of a command economy. According to the Juno Beach Centre in France, Howe had the power to control markets, allocate natural resources, determine what would be produced and in what volumes and assign specialists to jobs in the wartime economy.

That included corporate executives, whom he recruited as “dollar-a-year men.” They supervised government industries and 28 new Crown corporations Howe established to mine and process raw materials, build tanks, aircraft and ships and make essentials like synthetic rubber and machine tools.

One of those Crown corporations built affordable rental housing for war-industry workers; according to a 2025 article in Legion Magazine, Wartime Housing Ltd. built almost 26,000 houses between 1941 and 1947, renting for $22 to $30 a month. Many of them were sold to returning veterans after the war and are still standing today.

Canadian war historian Jack Granatstein notes that Howe also directed the expansion and retooling of existing factories, building new ones, and inventing new kinds of supply chains that presaged those now used by tech companies like Apple and Samsung: parts were made in smaller factories and then shipped to larger ones for assembly.

Meanwhile, consumer-focused industries like civilian auto production were suspended for the duration of the war.

A manufacturing colossus

A 2022 article by Mark Zuehlke in Legion Magazine notes that to staff those factories, Howe had to train over 600,000 workers, including 373,000 women. Among other items, these workers built 500,000 trucks and armoured personnel vehicles, 85,000 heavy guns, 12,000 aircraft and 600 ships. All told, the article says, “Canada manufactured more military vehicles than Germany, Italy and Japan combined.”

Howe was admired for his ability to break bureaucratic bottlenecks and get fast results. But he never had to consider the environmental impact of his policies, or consult with a single Indigenous person about exploitation of natural resources.

The Fagan report notes that by the end of the Second World War, our heavy wartime borrowing resulted in a net debt of over 100 per cent of GDP. But we had also raised and broadened taxes, limited profits on wartime production, created over two dozen Crown corporations and carefully controlled the money supply. Howe was determined that no Canadian would come out of the war as a millionaire, so he taxed profits heavily.

Running surplus budgets from 1947 to 1952 enabled Ottawa to wind up the command economy and pay down most of its wartime debt very quickly. It also helped that pent-up consumer demand and the start of the baby boom contributed to driving postwar economic growth, generating healthy tax revenues that serviced the remaining war debt.

No more dollar-a-year CEOs

Carney is not about to create a new command economy. Not many of today’s CEOs would willingly become dollar-a-year people (what would they say to their shareholders?), and Carney has already cut taxes where Howe and the Mackenzie King government raised them. Borrowing money from Canadians in the form of Victory Bonds would be a hard sell in this century.

Critically, the present hybrid war waged by Russia and China doesn’t feel like the existential threat posed by Nazi Germany, fascist Italy and imperialist Japan. Canadians of the Second World War saw Howe’s command economy as the only way we could make a real contribution to the war effort.

But between tariffs and his dreams of a 51st state, Donald Trump has challenged Canadians’ sense of security more than any foreigner since the Second World War. If Carney can tap into that anxiety, and then show early, dramatic effects on the military and the economy, he could use that growing support to do still more to ensure a strong Canadian economy.

Rearming Canada won’t be a rerun of the Second World War. We can expect to spend a lot on new technologies: AI, drones, cyberwarfare. We will also have to develop excellent counter-espionage — not only against the usual suspects like China and Russia, but against the United States as well.

The more Carney can accomplish, the less criticism of government we’ll hear. He’ll take plenty of criticism, and much of it will be deserved; after all, he’s a banker, not the Messiah. Howe wasn’t popular with everyone either, but he got things done and made Canada a formidable power.

If Carney can boost military spending to five per cent or higher by 2030, he will have achieved a great deal — and hopefully helped deter future Russian aggression that would require four or five times that much spending.